Banking (prudential standard) determination No. 6 of 2024
Calculation of the replacement costCalculation of the replacement cost
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Calculation of the replacement cost
- The RC of a transaction or netting set is measured as follows:
RC = max {V - CVMr + CVMp, 0}
where:
V = the market value of the individual derivative transaction, or of the derivative transactions in a netting set;
CVMr = the cash variation margin received that meets the conditions set out in paragraph 23 of this Attachment and for which the amount has not already reduced the market value of the derivative transaction V under Australian Accounting Standards; and
CVMp = the cash variation margin provided by the ADI that meets the conditions set out in paragraph 23 of this Attachment and for which the amount has not already increased the market value of the derivative transaction V under Australian Accounting Standards.